The central bank will conduct smaller-scale roll-over of 6-month outright reverse repos; institutions: RRR cut may be forthcoming

China Securities Journal, March 13 — On the evening of March 13, the People’s Bank of China announced that to maintain ample liquidity in the banking system, it will conduct a 500 billion yuan fixed-term, rate-based, multi-price bid reverse repurchase operation on March 16, with a maturity of 6 months (182 days).

Source: People’s Bank of China website

Data shows that in March, 600 billion yuan of 6-month reverse repos will mature. Therefore, the PBOC’s operation of 500 billion yuan of reverse repos on March 16 indicates a reduction in the scale of 6-month reverse repos for the month, with a decrease of 100 billion yuan. This is the first reduction in 6-month reverse repos since June 2025.

Wang Qing, Chief Macro Analyst at Orient Securities, commented that this may be related to the high net liquidity injection of 1.9 trillion yuan in the first two months of the year and the continued ample liquidity after the Spring Festival; on the other hand, it could also mean that RRR cuts are imminent. After the net withdrawal of 500 billion yuan in the April 2025 reverse repos, RRR cuts are expected in May. The next step is to closely monitor the March MLF operations.

Wang Qing stated that the net withdrawal of funds in March’s reverse repos does not mean the PBOC is tightening medium- and long-term liquidity. The central bank will continue to use a variety of policy tools to keep liquidity stable and ample. This is to ensure funding for key projects in important sectors, as the new local government debt quota for 2026 has been issued early. This indicates that the scale of government bond issuance in March will remain high. Additionally, by October 2025, 500 billion yuan of new policy financial instruments will be issued, and during the March “Two Sessions,” the government work report announced the issuance of 800 billion yuan of new policy financial instruments mainly to expand investment. These measures will continue to drive large-scale lending in March. All of these factors will to some extent tighten liquidity. (China Securities Journal APP)

(The views expressed are for reference only and do not constitute investment advice. Investing involves risks; please proceed with caution.)